Regulation Must Keep Up With Booming Digital Economy

Mexico faced its last major labor regulatory framework shift in 2019 with the Labor Reform, which has changed several practices from major adjustments in outsourcing and subcontracting to a new labor justice system. While these changes were considered necessary, the pandemic accelerated the need for the digitization of labor in Mexico. The law must keep up by adapting regulation and creating new favorable policies.

“The current outlook for the labor-focused regulatory framework in Mexico is positive. Authorities are already implementing technological tools and the industry must learn to use them optimally. The public and private sectors must continue to adapt to the reform. The country spent 40 years without adapting its regulation. Today, we are trying to catch up, but this proves challenging,” said Alfredo Kupfer, Labor Committee President of American Chamber of Commerce of Mexico.

While technology was already disrupting the labor market, the pandemic truly incited the revolution toward a more digitized world, said Kupfer. The legal framework should be adapted continuously to tackle new, challenging circumstances for both employers and authorities, he added.

“Technology leads us toward greater efficiency. The e-signature, although already regulated, is still not used widely within the labor market. Companies must take these opportunities and modernize labor relations. Remote work has also been regulated in Mexico, with a specific chapter dedicated to it,” said Kupfer.

The pandemic led to major and permanent changes in policies and practices for several companies. Remote working gained popularity due to the pandemic’s restrictions and lockdowns. Nevertheless, it also represents a challenge for regulators. There are different regulatory issues that policymakers should take into account, according to the EU Foundation for the Improvement of Living and Working Conditions. Problems include working hours, the right to disconnect, the right to request working from a distance, the relationship between the home office and gender equality, the work-life balance and psychosocial risks, among others.

“Regulators have a major responsibility to design the policy that generates best practices in remote work, including the incorporation of data protection, which is crucial for companies and to safeguard the privacy and safety of workers. There must be a balance between worker privacy and company supervision,” said Kupfer.

Furthermore, Mexico’s gig economy, a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs, has boomed in recent years. Online platforms such as food delivery or mobility applications were the main drivers of this development. Mexico already has 14 million people working under this modality, according to Forbes. This figure represents roughly 33 percent of the workforce. “Despite the great benefits the gig economy has brought to our region, there is still much work to do, especially after COVID-19. Informal work levels had already reached the 56 percent mark before the pandemic and it is estimated to have increased to around 62 percent due to the effects that lockdowns had on formal jobs,” Melina Cruz Villafaña, CEO, Homely, wrote for MBN.

Some countries have already regulated these digital platforms, forcing them to provide social insurance and benefits to workers. “Some companies have decided to close their businesses and move to other jurisdictions," said Kupfer, but other companies did enable access to benefits via their platforms.

Regulations play a key role in maintaining a fair market while protecting the rights of workers. As digitalization increases in Mexico, the regulatory challenges will continue to grow, concluded Kupfer. “This evolution is not going to slow down, and in this digital economy we must stay ahead with regulation.”